Placating Eeyore

February 25, 2016

Three steps to strengthen your bank’s customer complaint management

By Mary Wright Thorson

Nobody’s perfect. Yet community banks, as relationship builders, don’t like to hear customer complaints. Complaints signal something might have gone awry with a service or product. Or they could reveal a significant misunderstanding on a customer’s part.

Regardless, customer complaints can require significant manpower and energy to resolve. Now the ​Consumer Financial Protection Bureau is eagerly collecting and monitoring consumer complaints—if not subtly encouraging them—against financial institutions, which adds another layer of regulatory paperwork in handling these situations. Banks need to take steps to prevent what once could become a customer-relations headache from turning into a regulatory migraine.

Customer complaint management, now considered a component of a bank’s compliance management, has become a rest stop during compliance exams. The general expectation of the regulators is reflected in the FDIC’s Compliance Examination Manual, in Section II–3.4: “An institution should be prepared to handle consumer complaints promptly. Procedures should be established for addressing complaints, and individuals or departments responsible for handling them should be designated and known to all institution personnel to expedite responses.”

Although a community bank can’t do much about someone writing to the CFPB or other regulators, maintaining a robust complaint-management process can be a mitigating factor when such incidents are reviewed during compliance examinations.

Here are three compliant-management steps to consider.

1. Employ sound practices and good recordkeeping. Having a sound customer complaint-resolution process is important. Generally, complaints under the scrutiny of examiners are those received either directly or indirectly in a written form, including those received electronically.

In a perfect world, management would receive a complaint directly, and quickly investigate and resolve the issue. However, complaints are sometimes sent directly to regulators, or, in a worst-case scenario, to regulators after the first contact with the bank did not result in a satisfactory resolution; a complaint-resolution process should consider that possibility as well.

All personnel should know and understand complaint-resolution procedures. Develop and document talking points and messaging that employees use to fully explain products and services to help avoid problems.

Questions to answer: Who is responsible to investigate a complaint? How will a complaint be documented? Who will respond to a complaint? Who will ensure appropriate action is taken for a complaint? Who will maintain records?

2. Remedy past problems. Take stock of your community bank’s compliance performance, including that of third-party service providers. Review the types of past complaints and how they were resolved. Identify what affected a consumer’s misunderstanding of or dissatisfaction with a product or service.

Look closely at past complaints about service. The compliance bells and whistles can be flawless, but products and services should not be sold or explained by lackluster, unknowledgeable employees.

Questions to answer: What criticisms arose during past examinations, internal audits and independent reviews? How have exam issues been addressed? Were corrections or changes made to address identified problems? Did those corrections and changes help consumers?

More questions to answer: What service-related complaints have been received in the past and how were they resolved? Are frontline service staff members adequately trained to sell products, including how to interact with customers by telephone and email? Has their performance been tested, perhaps by an anonymous shopper assessment?

3. Improve performance. If you get lemons, make lemonade. Resolving and documenting consumer complaints is critical, but don’t just shut that information away in a drawer. Learn from it. Effective complaint management includes reviewing and adjusting business practices to avoid future complaints.

Complaints may reveal an organizational weakness, the CFPB says. Data from complaints can be used to improve customer service performance, enhance a business unit’s effectiveness or strengthen your bank’s overall compliance
management.

Mary Wright Thorson, a former Federal Reserve managing examiner and compliance consultant, is a financial writer in Virginia.